A geographic targeting order in effect since May applies to a wider range of real estate transactions than previous versions of the measure, and covers significantly more cities and metropolitan areas, sources told ACAMS moneylaundering.com.
The first GTO, issued by the U.S. Treasury Department’s Financial Crimes Enforcement Network in March 2016, required title insurance firms to obtain information on any individuals holding at least a 25 percent stake in legal entities used to buy luxury properties in Miami and New York in cash and without a bank loan.
FinCEN renewed the original order four times over the past two years and publicly expanded it to five other metropolitan areas where residential property often acts as gateway for suspicious funds: Los Angeles, San Francisco, San Diego, San Antonio and Honolulu. Wire transfers and other forms of payment beyond cash have been covered since August of last year.
The latest extension, which FinCEN for the first time imposed on a confidential basis in May, added five more metropolitan areas, lowered the price threshold for collecting ownership data as much as 75 percent and expanded the requirements to cover real estate acquisitions made in cryptocurrency, according to sources.
Title firms must now submit the data in currency transactions reports rather than form 8300s, and refrain from disclosing the existence of the GTO with clients unless they must do so to justify their efforts to identify beneficial owners. Even then, the terms must remain secret.
Representatives of some legal entity clients have threatened to switch to less scrupulous title insurance firms when asked to provide the names and other identifying information of their beneficial owners, a real estate industry professional told moneylaundering.com on condition of anonymity.
“When you get people who think the [title insurance] company is making it up, not having something you can point to … that’s the challenge you get into.”
GTOs must be renewed every six months to stay in effect, though lawmakers, including Sen. Marco Rubio (R-FL), have considered expanding the GTO on real estate and making the order permanent.
GTOs have proven popular with federal investigators, who use them to access data that otherwise could only have been accessed after the relatively lengthier process of obtaining a subpoena.
U.S. officials in the past few months have encountered examples of suspected money launderers and other criminals discussing whether they should avoid buying real estate in at least one city already publicly targeted by a GTO, according to a senior federal investigator.
The measures have another, less foreseen impact: some construction contractors in covered metropolitan areas have informed potential investors or developers that their ownership data could fall into the hands of the Treasury Department and law enforcement.
“This information is useful in some tangible ways … but there are hundreds, if not thousands, of ways that information has intangible value,” the federal investigator said. “The fact that there have been more GTOs is actually a testament to FinCEN’s willingness to try to get it as right as they can the first time, rather than come out with sweeping regulations.”
FinCEN disclosed in February 2017 that nearly one-third of all real estate transactions captured by the GTO shared links with individuals already named in suspicious activity reports filed by U.S. financial institutions.
The staged rollout of real estate GTOs over the past two years suggests that FinCEN may eventually seek to make the measure permanent, said Peter Djinis, formerly the bureau’s executive assistant director for regulatory policy. Djinis was unfamiliar with the details of the GTO but agreed to discuss the measure with moneylaundering.com in general terms.
U.S. officials have issued confidential GTOs prior to May.
In 1991, for example, the Treasury Department secretly ordered money services businesses in Houston to file CTRs on certain remittances after learning that some had created false invoices to disguise transfers of drug-trafficking proceeds to Colombia.
Despite a quiet rollout that saw the orders hand-delivered to the covered firms, the volume of targeted transactions dropped “almost overnight,” said Djinis, now a Florida-based anti-money laundering consultant.
“The effectiveness [of GTOs] is early on,” he said. “If you have a nice consortium of law enforcement and regulators looking at the activity and still have the element of surprise.”
|Topics :||Anti-money laundering , Counterterrorist Financing|
|Document Date:||August 22, 2018|